Investors’ millions siphoned off

2012-04-30 00:00

JOHANNESBURG — Over the past week a horrific tale has unfolded of how around R1,15 billion — belonging to investors who thought their money was safe in a money market — has apparently been plundered for personal gain by the directors of various investment companies.

Some of the money (almost R1 million) was allegedly even used by the directors to accompany the Springboks on a rugby tour and covered up in the books as “management costs”.

The curators of Corporate Money Managers (CMM), the Cash Managed Fund (CMF) and 10 associated companies are on a fierce offensive to try and recover money for the investors in the CMF.

Last week the curators served a summons for R1,1 billion on Absa Group which, as CMF trustee, said the curators, was supposed to have picked up the malpractices.

But a summons for the same amount was also issued on 21 individuals, 18 of whom were allegedly part of the “reckless, negligent or deceitful management” of 26 companies through which investors’ money in the CMF was apparently siphoned.

The curators’ court documents contend that the individuals were all involved in managing CMM and allegedly enriched themselves through misappropriation of the money invested in CMF.

CMM raised money from investors and invested it in the CMF, which was supposed to be a safe money market investment. The joint and separate actions of the directors of the bank, according to the curators, had led to investors in the CMF suffering a R1,15 billion loss.

It’s this amount that the curators are now attempting to recover from individuals who, according to one of them, had been involved in nothing other than fraud that they attempted to cover up.

The money in the CMF was not, as had been intended, invested in safe money market instruments, but was allegedly used for bridging finance for dubious property transactions, loans to companies in trouble and for property developments.

And when things started to go wrong, the losses were allegedly concealed by the issue of worthless promissory notes between the various related companies.

These promissory notes, issued between the related companies, were also lodged with Absa as proof that the CMF, of which Absa was the trustee, would be able to meet its obligations to investors.

The promissory notes were however worthless because the companies had no assets and, according to the curators, the issuers and signatories were aware of the fact.

In the process of apparently concealing the insolvency of the related companies, the promissory notes were repeatedly rolled over by cancelling the originals and replacing them with new ones.

The main protagonists in the alleged plundering of the CMF include the directors and management of the CMM and Allegro Holdings, a former subsidiary of the listed company African Dawn.

When CMM was put under curatorship in 2009, Johan Bakkes was the chief executive and head of investments at CMM and a director of seven of the related companies and three trusts, with himself and his family as the beneficiaries.

Frik Vermaak, who was appointed chief executive of Athletics South Africa last December, was the chief executive of Allegro Holdings and a director of Allegro Group Investments, Allegro Bridging, Allegro Property Services and five of the related companies that were allegedly involved in the misappropriation of the money invested in the CMF.

CMM and Allegro Holdings were joint shareholders in the company Miro Holdings, which in turn was the holding company of Miro Capital.

Miro Capital, according to the CMM curators, was one of four companies established with the special purpose of issuing promissory notes in favour of the CMM and the CMF so as to get money from the CMF to finance property deals for four other related companies.

The summons served on the individuals notes that the indebtedness of the respective related companies to one another — and ultimately the CMF — amounts to R1,6 billion and that 16 of the individuals involved in managing the companies are jointly and severally responsible for repayment of the R105,6 million to CMM or the CMF.

During the past week Absa announced that it intended defending itself against the steps being taken by the curators.

An amount of R989 000 that the CMM curators are demanding from former board members of CMM and related companies, was apparently spent on a rugby tour to Europe accompanying the Springboks in November 2008.

Two directors of CMM and six board members of Allegro Bridging, including Bakkes and Vermaak, were on the tour.

An amount of R1,1 million was apparently withdrawn from CMM’s bank account for travelling expenses.

The curators further argue that investors’ money was used for the rugby tour and, by means of creative accounting, was indicated as amortised debt in the CMM and Allegro books.

In the two companies’ books the money spent on the rugby tour was reflected as a loan to a related company, Miro Capital (in which CMM and Allegro were equal shareholders).

The payment of R17 000 to each of the board members on the tour was also noted in this loan account.

Miro Capital “repaid” the loan to CMM by, firstly, on two occasions crediting the loan account with “repayments by Miro” and then debiting the amounts in its books as management expenses to CMM.

— Sake24.

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